The Philippines residential condominium market is projected to maintain its upward trend in the next few quarters, although the upcoming volume of supply may put downward pressure on price growth.
According to real estate firm JLL in its latest research report, the impending interest rate hike by the U.S. Federal Reserve is less likely to affect the residential sector, with the Central Bank deciding to keep policy rates steady.
The Brexit decision in the U.K. is predicted to have no major impact on demand in the residential property in the Philippines.
More than 125,000 units are expected to come on stream in the Metro Manila residential market from Q3 2016 until 2020.
These developments will be focused in central business districts, such as Makati CBD and its fringes, Ortigas CBD and BGC.
SUPPLY
Total existing stock of mid-range to high-end residential condominium units in the Philippines residential condominium market as at end of Q2 2016 was estimated by JLL at 246,500.
Approximately 3,800 units were completed in the second quarter.
Some of the major new developments completed included Salcedo Square and Two Central in Makati CBD; West Tower at One Serendra and Arya Residences-Tower 2 in BGC; Avida Towers Centera-Tower 2, Acqua Private Residences, and Acacia Escalades-Building A in Ortigas Center; and Ilustrata Residences in Quezon City.
Some of the developments expected to be completed in Q3 include Eton Tower Makati and Park Terraces-Point Tower in Makati CBD; Avida CityFlex Tower 1 and Avida Towers 34th Street-Tower 1 in BGC; The Rochester-Breeze Tower, The Grove, Levina Place, and One Spatial Pasig in Ortigas Center; Avida Towers Prime Taft-Tower 1 and Camella Condo Homes Taft in Manila; Circulo Verde-Lleida Tower, Capitol Plaza, and 53 Benitez in Quezon City; Green Residences in Manila; and 101 Newport Boulevard in Newport City.
A number of residential projects were launched in Q2 including One Antonio, The Ellis and The Gentry in Makati CBD; and Pines Peak Tower 2 in Mandaluyong City.
The number of licences to sell (LTS) issued for residential developments in the entire country, measured by the number of residential units, declined by approximately 20 percent year-on-year.
LTSs for the economic housing segment exhibited the largest decline, falling by more than half in H1.
The social housing, low-cost condominium, mid-income housing, and open market categories also declined, albeit at a lower rate.
LTSs for mid- and high-end condominiums inched up by approximately 5 percent.
DEMAND
Positive economic activity, the sustained growth in OF remittances and the continuous expansion of firms in the O&O sector fuelled demand for residential condominium units.
This continued growth in demand in the Philippines residential condominium market was manifested by the steady growth in demand for housing loans.
The Senior Bank Loan Officer Survey, released by the BSP, showed a positive Diffusion Index for housing loans in 2Q16, implying a general growth in demand.
Healthy demand for newly completed developments led to a decrease in vacancy rates in the luxury condominium market in Makati CBD and BGC to 6.3 percent in Q2, from the 7.5 percent in the previous quarter.
Demand drivers in the luxury market included high income Filipino individuals, expatriate employees of the O&O sector, and multinational companies.
Pre-selling activity showed signs of improvement from last quarter, as more developments were launched in Q2.
Nevertheless, total annual launches were observed to have decreased steadily in the past few years.
ASSET PERFORMANCE
In general average rents across all sub-markets in the Philippines residential condominium market increased q-o-q.
Makati CBD and BGC maintained their positions as having the highest rents in Metro Manila, ranging from PHP 600 to PHP 1,000 per sqm per month for mid-range units, and from PHP 710 to PHP 1,750 per sqm per month for high-end units.
Mid-range residential units in the Ortigas/Mandaluyong sub-market had rents of PHP 360 to PHP 650 per sqm per month.
Meanwhile, Alabang commanded rents ranging from PHP 480 to PHP 910 per sqm per month.
Asking rents of mid-range units in Quezon City ranged from PHP 420 to PHP 690 per sqm per month.
Capital values grew faster than rents. Average capital values of luxury condominiums in Makati CBD and BGC in Q2 increased approximately 1.1 percent q-o-q.
BGC and Makati CBD continued to command the highest selling prices in Metro Manila, with capital values in BGC ranging from PHP 105,000 to PHP 172,000 per sqm for mid-range developments, and from PHP 145,000 to PHP 188,000 per sqm for high-end developments.
Makati CBD prices ranged from PHP 100,000 to PHP 150,000 per sqm for mid-range developments and from PHP 165,000 to PHP 255,000 per sqm for high-end developments.
Mid-range developments in the Ortigas/Mandaluyong sub-market had capital values ranging from PHP 79,000 to PHP 145,000 per sqm.
Quezon City had an asking prices in the range of PHP 78,000 to PHP 120,000, while Alabang prices were at PHP 86,000 to PHP 115,000.
